It’s Joe Biden’s Inflation He blames Vladimir Putin, but his policies and the Federal Reserve are at fault.
Inflation keeps rising, and working Americans are paying the price in falling real incomes. That’s the bad news from Thursday’s consumer-price index report for February, and the White House can’t blame Vladimir Putin for this one, though it’s trying.
The Bureau of Labor Statistics said prices rose 0.8% in the month, the fastest rate in four months. That’s 7.9% over the last 12 months, and 8.4% over the last three months. In other words, inflation is accelerating.
The inflation surge was driven by rising costs for gasoline, food and shelter (imputed rents). But the price increases were also broad-based, suggesting that the psychology of rising prices has set in with businesses and consumers. The price of services (not counting energy services) rose 0.5% for the month. Remember when inflation was supposedly caused by supply-chain shortfalls for goods?
Well, services aren’t goods. Transportation costs rose 1.4%, and shelter jumped by 0.5%. The latter are likely to keep rising because they usually trail housing costs (which aren’t directly part of the consumer-price index).
Used-vehicle prices, which some economists said a year ago explained nearly all of the inflation, were down in February but overall inflation still rose fast because inflation expectations are now embedded across the economy. The latest NFIB survey found that 68% of small business owners had raised their average prices in the last three months, a 48-year high.
All of this is bad news for workers, despite recent gains in nominal wages. A separate Labor report on Thursday found that real average-hourly earnings fell 0.8% for the month. Real wages have fallen in nine of the last 12 months, including 2.6% since February 2021. (See the nearby chart.)
That wallops low-income workers in particular because they pay a larger share of their wages for the household basics of food and energy, which are both rising fast. No wonder Americans are sour about the economy despite healthy GDP growth.
The White House was locked and loaded for the bad news on Thursday and blamed, no surprise, Mr. Putin. “Today’s inflation report is a reminder that Americans’ budgets are being stretched by price increases and families are starting to feel the impacts of Putin’s price hike,” President Biden said in a statement. “Putin’s price hike” quickly became a Democratic and media meme.
It won’t wash. Russia’s invasion has certainly contributed to rising oil and gasoline prices in recent weeks and, as villains go, he’s top of our list. But inflation had already hit 7.5% on an annual basis in January before Russia invaded Ukraine. The prices of oil and other commodities have been on an inflation-inspired tear for months. Gasoline prices were up 6.6% in February, but they’re up 38% over 12 months.
Mr. Biden can blame Mr. Putin for many things, but not U.S. inflation. The root cause is homegrown: Two years of historically easy monetary policy, and explosive federal spending that fed economic demand even though the economy had long ago emerged from the pandemic recession.
The Ukraine invasion will feed inflation in March and coming months if oil prices keep rising. But getting inflation back under control requires a U.S. policy change: Tighten monetary policy, and control federal spending.
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